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      Question

      A company is offered a trade credit term of "2/10 net 30" by its supplier. If it doesn't take the discount, what is the annualized cost of forgoing the discount?

      A 18% Correct Answer Incorrect Answer
      B 24% Correct Answer Incorrect Answer
      C 36.7% Correct Answer Incorrect Answer
      D 44.6% Correct Answer Incorrect Answer

      Solution

      Formula: Cost = [Discount / (100 โ€“ Discount)] ร— (360 / (Full Period โ€“ Discount Period)) = [2 / 98] ร— (360 / 20) = 0.0204 ร— 18 = 36.7%

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